Soon, millions of Americans are expected to start receiving what the government is calling "economic impact payments" of up to $1,200 per adult. That's part of the government's $2 trillion economic stimulus bill passed in response to the coronavirus outbreak.
You may still have questions about the stimulus money, including whether or not you'll have to pay taxes on that cash. Here's what receiving a stimulus check this spring will mean when you file your 2020 taxes next year, according to tax experts.
It should be, yes, says Janet Holtzblatt, senior fellow at the Urban-Brookings Tax Policy Center. "The government is giving you the cash now in an attempt to predict how your income will be disrupted in 2020," Holtzblatt explains.
The stimulus payment is an advance of a special tax credit meant to relieve some of the financial strain many Americans are experiencing. Usually, you can't claim a tax credit until you file your taxes, but given the severity of the coronavirus outbreak, the government is giving you the money early if you're eligible, says Holtzblatt.
When it's time to file your 2020 taxes next year, then you'll claim the amount you got for your stimulus payment. However, you still won't have to pay taxes on it, since it's not ordinary income.
Video by Stephen Parkhurst
The size of your stimulus check is based on the adjusted gross income, or your income minus certain deductions, that you reported on your most recent taxes, either for 2018 or 2019. How much you earn, your filing status, and how many children you have will be factored into your eligibility.
If you don't qualify for an economic impact payment this spring based on the income you reported on your 2018 or 2019 taxes, you could still be eligible for relief when file your 2020 taxes. If the pandemic affects your income this year and you now meet the government's criteria, you'll be able to claim the tax credit when you file your taxes next spring, Holtzblatt explains.
Use this calculator to figure out how much you could get.
Many tax experts say their interpretation of the stimulus package is that you won't have to repay any money you receive this spring based on your 2018 or 2019 income, even if you no longer meet the income criteria for the payment when you file your 2020 taxes next year.
"If you are eligible based on your 2018 or 2019 tax returns to receive a stimulus check, but would not under your 2020 return, you will not be asked to repay the difference. The money is yours to keep," says Riley Adams, a certified public accountant based in the Bay Area.
Nicole Kaeding, vice president of policy promotion and an economist with the National Taxpayers Union, expressed a similar opinion on Twitter, noting that previous rebates have not required repayment.
But Henry Grzes, lead manager for tax practice and ethics for the American Institute of Certified Public Accountants, recommended that taxpayers keep an eye out for IRS guidance on the subject. "The IRS hasn't officially said how they will deal with 'excess' payments," he says.
If you received a reduced stimulus payment based on your 2018 or 2019 taxes, you could still qualify to receive more when you file next year.
"Let's say you got $600 this year but your income decreased in 2020, making you eligible for more of the refund," Holtzblatt says. "You'll get the all or some of the other $600 leftover, or whatever amount you're entitled to."
It's important to remember that $1,200 per adult and $500 per child is the maximum amount of money you could get, at least for now. The government is discussing another stimulus package but the details are yet to be determined.
More from Grow: